off, and if it is agreeable to these gentlemen who have so zealously worked, we will take a recess until Monday, if that is agreeable.

Mr. WYLLIE. I think that I would personally very much enjoy a recess. We are just between the devil and the deep blue sea. We have about 9 months of concentrated work to get across here.

The CHAIRMAN. The committee will stand adjourned until Monday morning at 10:30 o'clock.

(Whereupon an adjournment was taken at 3:40 o'clock until 10:30 on Monday, Mar. 9, 1936.)

TO INVESTIGATE THE CAUSES OF THE DECLINE

OF COTTON PRICES

MONDAY, MARCH 9, 1936

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to adjournment, in the committee. room, 324 Senate Office Building, at 10:30 a. m., Senator Ellison D. Smith (chairman) presiding.

The CHAIRMAN. The committee will come to order.

TESTIMONY OF W. L. CLAYTON-Resumed

Mr. WYLLIE. I understand that Mr. Clayton has some figures he wishes to incorporate in the record this morning. Mr. Clayton, you may proceed to put those figures in.

Mr. CLAYTON. At pages 825 and 826 of the record on Friday, I stated that in my opinion the market could absorb from a million to a million and a half bales of Government cotton between now and August 31 without any decline in prices from the present level. I should have made it clear and now want to make it clear that this figure included cotton futures as well as spot cotton; in other words, that a part of this total would have to consist of the sale of cotton futures and the remainder of spot cotton. I understand that the Government is now holding roughly 800,000 bales of cotton futures. I believe that this total of futures can be liquidated and in addition, 500,000 to 700,000 bales of spot cotton held by the Government can be sold without causing any appreciable decline from present prices, say 10.75 for May, 10.40 for July, and 10.10 for October, I also wish to say that some one inquired on Friday as to the source of certain figures which I read into the record, showing the index numbers of cotton as compared with other commodities. These figures were read from the Weekly Trade Report of the New York Cotton Exchange Statistical Service but that report did not indicate the source of the figures. I now have obtained this information, and I will say that the index of cotton prices was compiled by the New York Cotton Exchange, the index of general business was compiled by the New York Times, indexes of farm products and all commodity prices were based on indexes of the Bureau of Labor Statistics.

At page 845 of the record on Friday I was asked by Mr. Wyllie if it were not true that the consumption of the American mills was running considerably behind the consumption of American cotton

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as a whole for the present season. I replied that consumption of American mills was in about the same proportion to the whole as for the past season, but I did not give any figures. I now have the figures, showing that consumption for the first 6 months of the present season of American cotton by American mills is 2,947,000 bales as compared with 2,622,000 bales for the same time last season. This shows an increase for the present season of 122 percent over the previous season. The consumption of American cotton by foreign mills this season is 3,207,000 bales for the first 6 months of the season as compared with 3,043,000 bales for the same period in the previous season, showing an increase in consumption of American cotton by foreign mills of a little over 5 percent for this season as compared with the previous season.

I would also like to give these figures of comparison of total world consumption for the 6-month period, August 1 to January 31. For 1928-29, which was the last season in which we had free and open markets without any Government intervention, the world consumed for the first 6 months of the season 7,645,000 bales of American cotton, whereas for the first 6 months of the present season, 1935-36, the consumption has been only 6,154,000 bales, showing a decrease for these 6 months in the present season as compared with the season 1928-29 of 1,491,000 bales or at an annual rate of 2,982,000 bales.

Senator NORRIS. I do not quite get the point there. In this comparison that you were making there, that was the 1928-29 season? Mr. CLAYTON. Yes; with 1935-36.

Senator NORRIS. Yes; but you have just given us figures of the preceding year in which there was an increase?

Mr. CLAYTON. Yes; an increase this year over the preceding year of 122 percent.

Senator NORRIS. As compared with 1928-29, it is a considerable decrease?

Mr. CLAYTON. Yes, sir; practically at the rate of 3,000,000 bales a year.

The world consumption of foreign cotton-cotton grown in foreign countries outside of the United States-in 1928-29 was 5,255,000 bales for the first 6 months of that season. For the first 6 months of this season, the world consumption of foreign-grown cotton was 7,339,000 bales, showing an increase in the consumption of foreigngrown cotton for these 6 months of this season over 1928-29—

Senator NORRIS (interposing). That same 6 months as compared with last year would show an increase?

Mr. CLAYTON. It shows an increase of foreign-grown cotton for both seasons, Senator Norris, but now I am comparing with the predepression period and pre-Government interference period.

Senator NORRIS. As compared with 1928-29, there was an increase of foreign cotton and decrease of American cotton but as compared with last year there was an increase?

Mr. CLAYTON. In both, as compared with last season; that is correct. For the first 6 months of the present season, the world consumed of foreign cotton 7,339,000 bales, showing an increase over 1928-29 of 2,084,000 bales in the consumption of foreign-grown cotton or at the rate of 4,168,000 bales a season. In other words, while

the world is now consuming cotton of all growths at a record rate higher than ever before reached, indeed at a rate of about a million bales a year higher than the previous maximum, the consumption of American-grown cotton has substantially declined as I have indicated at the rate of about 3,000,000 bales a year as compared with 1928-29 and the consumption of foreign-grown cotton has increased at an annual rate of about 4,000,000 bales a year.

I think that that has a good deal to do with the explanation of the present market situation. That is all, Mr. Wyllie.

Mr. WYLLIE. Mr. Clayton, if the consumption of American cotton has increased so substantially this past season over the previous season, would not the price of the commodity be due to increase much faster than it has? In fact, it is now declining rather than increasing. To what do you attribute that?

Mr. CLAYTON. Mr. Wyllie, the consumption of American cotton this season over last season has not increased so very greatly. It has gone up an average of about 8 percent, a little less than 8 percent over last season.

Mr. WYLLIE. But you would not expect the price of cotton to decline in the face of those figures, would you?

Mr. CLAYTON. Well, that is merely one of the factors entering into the situation. You have to look at all of the factors, and today the world is facing a very large foreign crop, which, as I have said, has been estimated as high as 15,000,000 bales for the present cotton season, as against a few years ago of 10 to 11 million bales, and also the cotton market of the world considers that under the new soilconservation program of this Government that the control over the production of cotton in this country will not be as effective as it was under the old program and that we may therefore expect an increase of the cotton crop for the season 1936-37 in the United States as compared with the past two seasons. So that from the standpoint of consumption, the situation is bullish. As I say, we are consuming cotton at a terrific rate never before equaled in the history of the cotton trade, but at the same time we are increasing and must look forward to increased production. The markets of the world are trying to discount that factor as well. Also, the world markets believe that we have finished, as I said on Friday, that we have come to an end of the period of impounding of cotton in Government hands. I think you must look at the matter not so much as a decline at the present time from the market of a year and a half ago as the market at that time was influenced upward by the program of impounding large quantities of cotton out of the channels of normal trade into Government hands, where it became frozen, but that what we are comparing with today is a price 18 months and 2 years ago that was the result of the American Government withdrawing large quantities, very large quantities, of American cotton out of the channels of trade where the cotton was not available to the mills of the world, and that price with which you are comparing now was induced by that situation, so that in order to get a picture of the situation and to understand why the price today with rapidly increasing consumption is lower substantially than it was a year and a half or 2 years ago you have to look not only at today's price in